Power Markets Week

After a slow period last month the Maryland retail market has picked up, with more customers signing deals with retail marketers as a July 1 price increase approaches for those that stay with their utility, observers said last week.

Several large customers have awarded contracts for power supplies, and because forward power prices have come down compared with where they were in May, "the market has taken off," said an official with a retail marketer. "Some customers are waiting, but many aren't," he said.

Reliant Energy Services and Pepco Energy Services have been on the winning end of several bids by retail customers recently, noted Taff Tschamler, principal with KEMA. The consulting firm has predicted that 3,000 MW of load in Maryland will be buying from alternative suppliers this summer, and Tschamler said that based on recent activity that projection is looking reasonable.

Commercial and industrial customers in Maryland will see their rates increase at least 20% on July 1 if they continue to buy from their local utility. The PSC in April authorized the new rates for standard-offer service based on an auction from wholesale suppliers. While there were expectations that the retail market could pick up based on the auction results, forward power prices have been elevated this spring, hindering the ability of marketers to offer savings to customers (PMW, 24 May, 1).

In the last week or so, however, "prices have come off and there are a fair number of deals being done," Tschamler said.

Prior to the supply auction, about 1,800 MW of load was buying from marketers, and since then publicly announced deals have reached about 750 MW. With the July 1 deadline looming, "I think it's a hot market" and another 500 MW will switch, although some customers will wait and see where forward prices go, he said.

With the Maryland market picking up, prices in the Chicago market have hindered competition, according to Econ One Research's Retail Power Index, which shows that the regulated generation price for Chicago dropped more than 2% in June. "The drop was due to new customer transition charges that took affect in June for the Commonwealth Edison service area," said Guy Sharfman, director of energy strategy for Econ One.

The drop in the regulated generation price coincides with a rise in ComEd wholesale prices that resulted after the utility joined PJM Interconnection. "It's likely that the combination of lower regulated prices to beat and higher wholesale prices will strain competition in ComEd's service area," said Sharfman.

Recognizing that this spring, ComEd and its parent Exelon allowed marketers to buy power in April at what were below-market prices, fending off what might have been a return to utility service for many customers (PMW, 21 June, 1).

In other RPI markets, the regulated generation price for Dallas rose by almost 5% due to an increase in TXU's fuel cost recovery factors for its price to beat. That took effect in June, and earlier this month the utility sought another increase in its price to beat, which would be the last one allowed under the state's restructuring rules.

The Public Utility Commission is scheduled to act on the latest request within 45 days. TXU said that the proposed hike is needed to reflect a 12.7% increase in natural gas prices since it filed its previous request in late March.

Because more than the 40% of the small-commercial load in TXU's delivery area has switched to alternative suppliers, the company is allowed to offer those customers competitive rates as well as price-to-beat rates, but it has not done so yet.

The regulated generation price for New York also increased in June, due to a jump in the market supply charge that took effect for Consolidated Edison.

Econ One's RPI shows a retail power spread, which is the difference between the lower retail generation price, either regulated or competitive, for small commercial customers, and the relevant wholesale hub price.

The wholesale price used for the RPI is a 24-hour block price based on standard wholesale market instruments for the upcoming 12 months. Econ One uses forward on-peak prices as reported in Platts' Megawatt Daily and historical day-ahead off-peak prices reported by Platts at the closest available traded wholesale hub. Because of the absence of New York Zone J forward price reporting, Econ One does not calculate a spread for New York City. At the request of retail suppliers, it uses the Cinergy hub to calculate a spread for Detroit.

More information on the methodology and how to participate in the survey is available from Econ One by calling Sharfman at 713-228-2700, at the company's Website: www.econone.com; or by e-mail to retailindex@econone.com.